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Megan DeMatteo is an editor and poet based in New York. In 2020 she helped launch CNBC…
Bitcoin topped $45,000 this week for the first time since early January, when its drop below $34,000 took it to its lowest price since July.
Though Bitcoin appears to be back on the rise, its current price is still a long way off from the latest all-time high it hit in November, when it went over $68,000.
Even with the recent decline in price, Bitcoin is still more than twice as valuable as it was just a couple years ago. For Bitcoin, these kinds of ups and downs are nothing new.
Despite the volatility and recent slumping price, many experts still say Bitcoin is on its way to passing the $100,000 mark, though with varying opinions on exactly when that will happen. The volatility is nothing new, and is a big reason experts say new crypto investors should be extremely cautious when allocating part of their portfolio to cryptocurrency.
Bitcoin has shown as steady a rise in value over the years as any other cryptocurrency on the market. It’s only reasonable for Bitcoin investors to be curious about how high it can ultimately go.
Unfortunately, Bitcoin’s price is extremely difficult to predict and even more susceptible to market factors than more established asset classes. But we decided to ask some experts for their best guesses anyway. Here’s what they said:
It was easy to predict a $100,000 Bitcoin price late last year, coming off its latest all-time high in November. With Bitcoin’s big fall since then, the prediction game is even trickier.
The most extreme crypto skeptics say Bitcoin will tank to as low as $10,000 in 2022, but a middle ground might be to say the cryptocurrency can still climb to $100,000 like many experts predicted late last year — just on a slower timeline.
“The most knowledgeable educators in the space are predicting $100,000 Bitcoin in Q1 2022 or sooner,” Kate Waltman, a New York-based certified public accountant who specializes in crypto, told us back in November 2021.
But now, bullish experts are re-evaluating the crypto industry altogether as major corporations like Nike and other big brands are looking at ways to monetize their products in the digital metaverse. The rise of metaverse games, worlds, products, and experiences is increasing the popularity of altcoins, which has changed investors’ sentiments about Bitcoin (known as the original crypto).
Many experts are hesitant to predict a number and a date, but rather point to the trend of Bitcoin increasing its value over time. Investors should expect a “pretty sustainable” rise in Bitcoin’s long-term value driven by organic market movement, with the $100,000 threshold in near-sight, predicted Jurrien Timmer, director of global macro at Fidelity Investments, last October.
“What I expect from Bitcoin is volatility [in the] short-term and growth [in the] long-term,” says Kiana Danial, founder of Invest Diva and author of “Cryptocurrency Investing For Dummies.”
Here are some more predictions we found, ranked from low to high over the next year:
Big financial institutions have made their own predictions, as well, with JPMorgan predicting a long-term high of $146,000 and Bloomberg predicting it could hit $400,000 if the currency climbs at rates comparable to the past.
Even if Bitcoin breaks $100,000, stay focused building on your overall portfolio including passive index funds, emergency savings, and your retirement account(s).
Normal economic factors influence the price of cryptocurrency just like any other currency or investment — supply and demand, public sentiment, the news cycle, market events, scarcity, and more.
As a new and emerging asset, additional factors influence Bitcoin’s value more than the average currency or security. Here are some:
There are only 18 to 19 million Bitcoins currently in circulation, and minting will stop at 21 million. Industry experts consistently point to this built-in scarcity as a big part of cryptocurrency’s appeal.
“There’s a fixed supply but increasing demand,” says Alexis Johnson, president of the blockchain public relations and events company, Light Node Media.
Other experts point out Bitcoin has value because people give it value. “That’s really why everybody’s buying — because of the psychological aspect,” says Nelson Merchan, Johnson’s Light Node Media co-founder. That can make it difficult for the average consumer to discern whether Bitcoin and other cryptocurrencies are legitimate. The whole concept of supply and demand only works when people want something scarce — even if it previously didn’t exist.
“It actually does almost kind of seem like a scam,” Merchan says about Bitcoin’s origins. Though he says he’s seen his crypto holdings reach millions at times since he began investing in 2017, he’s also seen them disappear in an instant.
“I’m a big believer that if it’s not in cash, you don’t really have that money because in crypto, anything can drop dramatically overnight,” Merchan says. This is why certified financial planners suggest only allocating 1% to 5% of your portfolio to crypto — to protect your money from the volatility.
One of the main factors driving the price increase of Bitcoin is the rate at which new consumers are buying and exploring cryptocurrency, says Waltman.
“Crypto technology is being adopted at a faster rate than humans first adopted internet technology,” she says. Assuming it continues, the compounding acceleration of new adoption could keep pushing the value of Bitcoin higher and higher.
Bitcoin adoption has been increasing at an annual rate of 113%, according to data from the digital asset management firm CoinShares. (Meanwhile, people adopted the internet at a slower rate of 63%.) If people warm up to Bitcoin at a comparable rate to that of the internet’s early days (or faster), the report makes the case that there will be 1 billion users by 2024 and 4 billion users by 2030.
CoinDesk reported last month the number of new wallets worldwide increased 45% from January 2020 to January 2021, to an estimated 66 million. Popular crypto exchange Coinbase says it has now over 73 million worldwide users, while fellow exchange Gemini recently released its “State of U.S. Crypto Report,” which found 21.2 million Americans own cryptocurrency of some kind.
Federal officials have made it clear in recent months they are paying attention to crypto. Industry professionals have recently alluded to what crypto insiders perceive as “hawkish” federal regulation being one key driver for Bitcoin’s lagging price. In a recent CoinDesk First Mover interview, Seth Ginns, a CoinFund managing partner, said “the Fed moved to a hawkish position [on crypto regulation] just as Omicron started to tick up in the U.S.,” which could have increased doubt in crypto as a viable asset—resulting in January’s bearish sentiments.
Crypto regulation brings up a lot of unanswered questions. President Joe Biden recently signed an infrastructure bill requiring all crypto exchanges to notify the IRS of their transactions. Similarly, Treasury Secretary Janet Yellen recently said stablecoins — a type of crypto linked to the value of the U.S. dollar — should be subject to federal oversight.
The conversation on regulatory policies is “patchy,” said an industry white paper published by Flourish, a fintech platform designed for investment advisors. With a relatively new asset class like cryptocurrency, any new regulation has potential to impact value.
When China banned crypto in September 2021, for instance, investors saw the price of Bitcoin drop, though it has since risen and resumed its usual volatility. Even though there’s now about a decade of precedent for Bitcoin, the Securities and Exchange Commission is taking all decisions on a case-by-base basis in what experts refer to as its “crawl, walk, run” strategy toward mainstream crypto adoption.
“[Regulation has] kind of evolved over the last five years,” says Ben Cruikshank, head of Flourish, “Regulators can always change their mind.”
Finally, another major influence on Bitcoin’s price is a cycle known as halving. It’s complicated and algorithmic in nature, but in essence halving is a step in the Bitcoin mining process that results in the reward for mining Bitcoin transactions getting cut in half.
Halving influences the rate at which new coins enter circulation, which can impact the value of existing Bitcoin holdings. Historically, halvings have correlated with boom and bust cycles. Some experts try to predict these cycles down to the day after a halving event concludes.
As with any investment, financial planners and other experts advise against letting Bitcoin’s price fluctuations lead you to emotional decision making. Studies have shown investors who contribute regularly to passive index funds and ETFs perform better over time, thanks to a strategy called dollar cost averaging.
That’s part of why experts recommend not investing more than 5% of your overall portfolio in cryptocurrency, and never to invest at the expense of saving for emergencies and paying down high-interest debt. The path to long-term wealth and saving for retirement is most often successful for people with diversified investments like low-cost index funds, with crypto making up a very small part.
And even with crypto, experts say a set-it-and-forget-it approach makes sense. “Passive investing is a very valid way to achieve financial goals,” says Arkansas-based certified financial planner Sarah Catherine Gutierrez.
Since crypto is still new to most people, it’s OK to wait and see how things unfold before putting your money on the line. We only have about 10 years of data to inform crypto price predictions, and the value of Bitcoin — while potentially climbing long-term — is highly volatile from day to day.
Volatility makes it hard to know the “what” and “why” behind your crypto strategy. Before investing in Bitcoin or any alternative assets, ask yourself what you want to achieve from your participation in this particularly volatile market, and why. That will help you stay focused.
“I don’t think people understand across the board how to value [Bitcoin],” says Gutierrez. “When you’re buying it, you need to know your expectation of what value you’re going to get from what you’re buying.”
Financial planners don’t have a bias against cryptocurrency, Gutierrez says, particularly if a client expresses an interest in learning about it. However, you should ask yourself whether you need crypto as part of your plan. In most cases, says Gutierrez, the answer is no.
“Our take is that we don’t think you need Bitcoin in order to reach financial goals,” she says, adding that the average person should favor simple ways of investing that are easy to understand. This will keep you on track for core financial goals and better position you long-term for a healthy retirement.
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